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In June 2013, Israelis and Palestinians agreed to nine months of “sustained, continuous, and substantive negotiations on the core issues,” with the goal of reaching a peace deal by April 29, 2014.

Israel agreed to release 104 veteran Palestinian prisoners in four phases. Palestinians were to refrain from unilateral moves, including joining United Nations treaties and conventions that would bolster its claims to statehood – already sanctioned by a 138-9 UN vote in November 2012 – and potentially enable it to bring war-crimes charges against Israeli leaders in the International Criminal Court.

By winter, with a peace deal seemingly out of reach, expectations were lowered. The goal was downgraded to creating a US framework outlining realistic meeting points between Israelis and Palestinians on issues from borders to refugees, based on extensive conversations with each side.

Israel released at least 78 prisoners in three tranches. Palestinians refrained from unilateral moves for eight months. The US made significant headway on a framework agreement, but Palestinian Authority President Mahmoud Abbas rejected three key principles in March: recognizing Israel as a Jewish state; giving up the Palestinian refugees' right of return; and committing to an end of conflict, meaning the peace deal could not be used as a foothold for further Palestinian claims.

Time was clearly running out, so the two sides began discussing a six- to nine-month extension. According to an Israeli knowledgeable about the talks, some aspects of that extension were to include: Israel releasing further prisoners and exercising “significant restraint” on West Bank settlement building, and a more focused effort to agree on borders. According to a new report from Peace Now, Israel approved plans and tenders for at least 13,850 new homes in East Jerusalem and the West Bank during the talks.

Why did the talks break down?

As the March 29 deadline for the fourth release of Palestinian prisoners drew near, Israel dragged its feet on the release – a hugely controversial issue, since many of the prisoners had been involved in attacks on Israelis – because talks were already off track. Israel pressed the PA to commit to an extension first, even though that was not an original condition for the release.

Palestinians vowed serious consequences if Israel reneged. After the March 29 deadline came and went with no release, the PA applied to 15 United Nations conventions and treaties. Their accession would effectively acknowledge Palestine as a state. “To Israelis, it sounds like a creeping process of advancing the statehood outside the [parameters] of negotiations,” says the Israeli knowledgeable about the talks.

However, the two sides had one of their most productive meetings yet on April 22, at least from the Israeli perspective. But the following day, Mr. Abbas blindsided the Israelis by announcing a reconciliation deal with Hamas, which seized control of Gaza from Abbas’s Fatah faction seven years ago.

Israel, which considers Hamas a terrorist organization, cut off all talks and accused Abbas of siding with terrorism instead of peace. However, Abbas would need Hamas to make a peace deal stick, since the group has an estimated 20,000 armed security forces along with a significant arsenal of rockets, some of which can reach Tel Aviv.

Where do things stand?

Israel is in a wait-and-see mode. If Palestinians seeks membership in the ICC, or form a unity government backed by Hamas, Israel will likely resort to sanctions and abandon any efforts to get back to the negotiating table. Several previous reconciliation pacts between Hamas and Fatah ran aground when they couldn’t agree on how to share power.

What would Hamas have to do for Israel to deal with them?

Hamas’s charter calls it a religious obligation to wage jihad for the Palestinian cause, and to restore all of Palestine to Palestinian control. That includes modern-day Israel.

Israel, like the international Quartet – the US, UN, European Union, and Russia – insists that Palestinian parties to the peace process must recognize Israel, give up violence, and adhere to previous diplomatic agreements. Hamas has done none of these things, and Israelis are skeptical of statements by some leaders that indicated a willingness to support a two-state solution. The Palestinian Liberation Organization (PLO) once had a similar charter but eventually renounced violence.

Therefore, Israel has refused not only to deal with a government that includes Hamas, but also a government that is “backed by” Hamas. So even if Abbas led a government with no Hamas members, and it agrees to the Quartet principles, that wouldn’t be enough for Israel. Hamas itself would have to adopt those three principles.

What are the alternatives to a negotiated two-state solution?

Israel defines itself as a Jewish, democratic state. Many say only a negotiated two-state solution will enable it to remain both Jewish and democratic. Here are some alternatives:

One-state solution: Historic Palestine, including Israel, the West Bank, and potentially the Gaza Strip, becomes a binational state with equal rights for all. This is increasingly popular among Palestinians, but most Israelis reject it because it would compromise the state’s Jewish character.

Israeli annexation of West Bank settlements: Israeli cabinet member Naftali Bennett, a former settler leader, has proposed annexing 60 percent of the West Bank currently under Israeli control, which includes approximately 350,000 Israeli settlers as well as at least 100,000 Palestinians who would receive full citizenship. Then in the remaining pockets of territory, Palestinians would “govern themselves in ‘autonomy on steroids,’” Mr. Bennett told journalists this week. For Palestinians, this is a non-starter.

Unilateral two-state solution: Another option floated by the Israeli source would be for Israel to unilaterally decide its own parameters for a two-state solution, and implement them on its own – leaving the Palestinian Authority to form whatever sort of state it can with the leftovers.

Economic peace: Based on the belief that jobs equal peace and stability, Israeli proponents advocate boosting the Palestinian economy by lowering restrictions on trade with Israel and abroad, increasing the number of jobs and/or permits available to Palestinians in the Israeli economy, and promoting Palestinian industrial areas within the West Bank. Xavier Abu Eid of the PLO's Negotiation Affairs Department in Ramallah, rejects that idea. "That's the agenda [of those] with the Israeli government who don't believe in ending the occupation," he says. "Even though [a better] economy might help, it cannot be considered a substitute to the political track."